Older Worker Exploitation:  Magnitude, Causes, and Solutions

By Teresa Ghilarducci and Siavash Radpour

People older than age 55 will fill 7 million of the 10 million new jobs created between 2016 and 2026. Working longer seems to be the solution to many, if not all problems related to retirement—it is supposed to be good for older adults’ physical and mental health and to pro­vide them with a community. It also could help compensate for inadequate retirement savings, and even fix future financial shortfalls in the Social Security system.

But many of these so-called advantages to working longer have been proven to be incorrect, and others are infeasible or harmful to at least parts of the older adult population. And even if these benefits were real, working longer negates the idea of retiring at all, shrinking the years during which people could be in retirement.

Eliminating retirement is not the same thing as solving retirement income security. In prac­tice, telling someone to work longer ignores the fact that working at older ages is mostly a deci­sion made by employers, not by workers. Most retirees say they left the labor force at a younger age than they had originally hoped they would (Gosselin, 2018; and see Johnson’s article in this issue, page 63). Experts and policy makers must come up with a better solution than merely to advise people to work longer so as to improve their quality of life in older age.

One oft-stated advantage to working longer is that people delay claiming Social Security and receive a guaranteed 6.75 percent to 8 percent increase in benefits for each year they hold off on claiming benefits. But this advantage is available only to those who can afford to wait—meaning those who are already financially well off. About 1 percent of Social Security claimants claim ben­efits at age 70, and 45 percent of older workers (authors’ calculation from the Health and Retire­ment Survey) claim benefits while working—pos­sibly to give themselves a raise!

If working longer was such an obvious solu­tion to retirement challenges, and yields substan­tial benefits for older adults, then why aren’t there more of them working until age 70 and claiming benefits? The answer is that the workplace may not be as friendly to older workers as advocates for working longer might have hoped.

Disincentives to Work Longer Are Plentiful

Much of the economic literature on work later in life concentrates on disincentives for older peo­ple to keep working. Specifically, this cohort will give up Medicare benefits and be exposed to an earnings test (below the age inaccurately called “full retirement age”—age 67 for those born after 1960), which places a high implicit cost on work­ing. The literature, though, overemphasizes the impact of these “sticks,” or the negative impact Social Security benefits have on discouraging work. For one, Social Security benefits keep accruing past age 62, and benefits are based on average monthly income, which is based on the highest earnings in thirty-five years of work, no matter how long one has been employed.

In the United States, age 70 is the full retire­ment age, the age at which beneficiaries can col­lect their maximum benefits. Any claim before age 70 incurs a penalty. Collecting at age 62 reduces the benefit by 35 percent, and penalties decrease as claims ages grow. The idea behind this policy is that the penalties for retiring and claiming benefits prior to age 70 will encourage Americans to work longer.

But half of Americans retire at age 65, and only 71 percent of Americans claim their Social Security benefits when they retire. About one-fifth of workers claim benefits at earlier ages while they are still working, in order to boost their incomes. These workers never receive any benefit from delaying their claims (authors’ cal­culations). The increase in benefits (or penalties, in the case of early retirement) should provide enough incentives for older workers to stay in their jobs.

Changes in pension design also have encour­aged more work among older adults, but shift some risk to workers. Defined benefit plans on balance encourage retirement because the abil­ity to accrue benefits after, say, age 65, is limited. There are no limitations in 401(k)-type plans. Also, in 2000, the earnings test past full retire­ment age was eliminated. Eliminating manda­tory retirement was also meant to keep older workers in the labor force for a longer duration.

In practice, however, these policies do not work as intended. Sticks to work longer are effec­tive for some, but brutal to others. Employers have practically eliminated retiree health plans, which used to encourage work at older ages. Eroding pension security and increased housing and health expenditures encourage work at older ages for people who are too desperate to fully retire. And collecting Social Security at age 62, at a reduced benefit, could encourage some peo­ple to work longer. Unfortunately, age discrimi­nation in those growing sectors offering good jobs, especially in finance and technology, has discouraged work and made working longer less rewarding than it would have been previously.

The most significant force pushing older people out of the labor market is not workers’ unwillingness to work (or labor supply side), but the industrial restructuring and downsizing that puts older people at risk (labor demand side).

Older workers face considerable obstacles to work in the form of ageism, age discrimination, lack of training, and flexible jobs. The United States does not have the activist, pro–older work­ers systems that some European countries pro­vide, such as incentives for phased retirement.

Employer Policies that Can Keep Older Adults Working

Financial incentives and the current work envi­ronment in the United States would have to evolve to ensure older people would not be too expensive to hire. Older workers would need flex­ibility in work hours and continual training to keep skill sets current. Changes to social norms, especially ageism, and a determination to end illegal age discrimination would have to occur for older people to successfully work longer.

Some new policies—potential “carrots”—that could induce employers to hire older workers and induce older people to keep working include making it cheaper to hire older workers by re­­ducing the Medicare eligibility age to 62, and making Medicare the first payer for employer health insurance. These strategies would allow employers to save thousands by including older workers in employee health plans.

Other policy recommendations to increase older adult labor force participation would be to protect older workers against age discrimination in hiring, promotion, and training; but currently there is no bipartisan support for a comprehen­sive bill, and thus little chance for anything to pass. The most promising legislation is narrow in scope. The Protecting Older Workers Against Dis­crimination Act, which passed the House in June, would reverse a 2009 U.S. Supreme Court deci­sion and would make it easier for individuals to success­­fully challenge age discrimination in court. To fully engage older workers on an equal basis, what is needed are proactive and preventive poli­cies, not merely rules enabling defensive lawsuits.

Improving pay for older workers also could help encourage them to work. Raising the mini­mum wage and lowering barriers to unionization would make work more attractive to older work­ers. Expanding the earned-income tax credit to people who have no children and raising the minimum wage may increase the household income of working older households.

Last, collateral damage from increasing dis­ability and morbidity caused by older people working to age 70 must be acknowledged. Work is good, and many Americans like it. Anyone who loves to work should be able to do so. The bene­fits of secure and adequate retirement programs extend to groups not often thought of as benefit­ing from pensions: the young, employers, tax­payers, and the economy as a whole. However, penalizing retirement will hurt those who are not accepted by the labor market, or those whose situations, health-related or otherwise, do not allow for working longer.

In this Issue

In this Fall 2019 issue of Generations, the fifteen articles that follow, in four sections, explore the implications of older people having to work lon­ger to overcome the steady erosion of retirement income security that has occurred across the past thirty years. Most authors represent the discipline of economics, with one journalist in the mix.

The central question addressed in this issue is how can the vast majority of the 18 million peo­ple approaching retirement age between 2018 and 2028 expect to rely only upon Social Security benefits (the average benefit is $1,300) in old age? About half of workers reaching age 60 in 2018 have a 401(k)-type plan or IRA with an median balance of $92,000, and about half of these older workers have no retirement savings at all.

Section one lays out the landscape of the older worker labor market: their pay and work­ing conditions, and how their bargaining power has changed. Though social policy presupposes the goal that every adult who wants to work will have a job, some social theorists define work as a “right,” to be coupled with the aspiration to eliminate barriers faced by adults who want to work in old age.

The right to work should be expanded to include the right to retire after a lifetime of working.

In the first article, Papadopoulos describes the growing inequality in compensa­tion for older workers by gender, race, and edu­cation levels. Older workers are employed in growing and shrinking sectors, and are more likely to be in low-paying traditional jobs and jobs with contingent characteristics.

Ghilarducci addresses power in the labor market and why older workers have been losing bargaining power. Policies that strengthen older workers’ fallback positions—enhanced unemployment benefits for laid-off older work­ers or programs such as a universal pension plan like the Guaranteed Retirement Account, which helps workers to accumulate retirement savings—would improve older peoples’ jobs (Ghilarducci and James, 2018). A Department of Labor Older Workers Bureau, similar to the Women’s Bureau formed in the 1920s, should be established to investigate the conditions of older workers and to formulate standards and policies to promote the welfare of wage-earning older people, while advancing opportunities for fairly paid employ­ment at a living wage.

Van Horn and Heidkamp address the fact that millions of older Americans work in precarious or part-time jobs with low wages and no benefits. The article also discusses involun­tary part-time work, pay rates, share of income coming from part-time work, and the gender and race of older part-time workers. The authors rec­ommend lifelong learning, increased enforce­ment of anti-age discrimination laws, and stronger social insurance.

Estes and DiCarlo view older workers from what they call an “emancipatory gerontology” perspective, and within the politi­cal-economy-of-aging framework. In this frame­work, policy debates and policy outcomes may be understood as socially constructed narra­tives, which means that all labels and problems regarding older workers should be contested and understood from a more general social and political point of view.

Sociologist and writer Katherine Newman describes the research for her book on how workers’ losses of promised pensions and lack of retirement readiness degrade individuals, hurt families’ living standards, and harm com­munity health.
Section two examines the barriers facing older workers who need to work longer. Barri­ers to training and promotion mean that older workers are more likely to be laid off or pushed out because of persistent ageism and age dis­crimination. As a result, many older workers face longer unemployment periods and are left with no options other than to retire with insufficient resources.

Both Neumark and Song McLaughlin, describe the insidious practice of age discrimination. America is unique in its long tradition of having statutory protec­tions against age and disability discrimination. But the physical and mental conditions fac­ing older workers are becoming more difficult—should age discrimination laws take on some characteristics of the ADA and require accom­modation? Song McLaughlin cautions those who advocate for working longer to be mindful of persistent age discrimination. Neumark explains the uses of audit studies as the gold-standard for discrimination research.

Alicia Munnell is a longtime (but reluctant) advocate of people working longer to make up for eroding pensions and declining Social Security benefits. Social Security benefits are declining for two reasons: because Medicare premiums are increasing and Medicare premi­ums are deducted from Social Security benefit checks; and  because the normal retirement age has been increased from age 65 to age 67, which means a benefit for a cut for people collecting benefits at all ages. But Munnell worries that lon­gevity and health gains have disproportionately gone to the top of the socioeconomic status (SES) distribution. People at lower SES have lost union and bargaining power. Can the bottom third really work in jobs that match their abilities?

The third section features articles examining the working conditions of older workers. Older workers with adequate pensions and retirement savings have more bargaining power—their choice to work is because the benefits of work far outweigh the costs. But for workers without those assets, their choice to work longer is con­strained; though the benefits of working could be minimal and the psychological and health costs high, they would continue to work.

Schmitz, a health economist working on genomics, and her colleagues McCluney, Sonnega, and Hicken note that older workers’ mental health is affected by various workplace factors and correlated with SES. Bad jobs can lead to deteriorating mental health and an early exit from the labor force. But the good news is that there are ways workplace environments can be adjusted to improve workers’ perceptions of their psychosocial environment and, consequently, their health and labor force attachment.

Johnson is perhaps the most well-known expert in this issue on the labor market for older workers. He updates his work (chill­ingly, first presented immediately after the 2008 crisis), which shows that experience does not matter as it once did in the labor market. For this issue he updates that paper, concluding that the rates of return for seniority and experience con­tinue to fall, while older workers’ wages do not grow proportional to their experience.

Phillipson and Lain are two pro­lific writers in the area of “emancipatory geron­tology” and have sharp insight into why older workers are increasingly likely to be in low-pay­ing, insecure jobs with little control over their jobs’ pace and content. They use data gleaned from hospitality workers in England to show the negative effects of expecting people to work beyond traditional retirement ages when they have low levels of health and education and struggle to continue working in physically demanding jobs.

Kyle Moore complements Mun­nell’s work and addresses the effects of work upon older people from a stratification econom­ics point of view, taking into account their socio­economic status and race. Black older workers are more likely to face high levels of stress at work, with severe health consequences.

Kate Bahn reviews how older women are exposed to employers’ monopsony power, which exploits workers by keeping wages low. The gender wage gap and women’s choices to work in low-wage industries eventually lead to inadequate retirement savings, which further reduce women’s bargaining power at older ages. Older women’s wages would be higher if they had more bargaining power.

Section four describes how to move forward. Journalist Helaine Olen envisions what the future of work and retirement will look like for Millennials and calls for a common­sense retirement income security policy. Finally, Monique Morrissey (page 98) outlines one such policy, the Guaranteed Retirement Account, which aims to solve the problem of inadequate retirement income, and to increase older work­ers’ bargaining power by giving them a way out of low-quality, low-paying jobs.

Teresa Ghilarducci, Ph.D., is a labor economist and expert in retirement security. She is the Bernard L. and Irene Schwartz professor of economics at The New School for Social Research and the director of the Schwartz Center for Economic Policy Analysis (SCEPA) and The New School’s Retirement Equity Lab (ReLab) in New York City. Siavash Radpour, Ph.D., is a research associate at SCEPA.


Ghilarducci, T., and James, H. 2018. Rescuing Retire­ment. New York: Columbia University Press.

Gosselin, P. 2018. “If You’re Over 50, Chances Are the Decision to Leave a Job Won’t Be Yours.” ProPublica, December 28. tinyurl.com/y46y6mpp. Retrieved July 12, 2019.